Duma Bill on Spending Threatens Budget
19 January 1995
In a move likely to render the government's current expenditure plans for 1995 completely unworkable, the State Duma voted Wednesday for a radical increase in social spending and demanded that the cost of the war in Chechnya be included in the 1995 draft budget.
The legislature passed the second reading of a bill raising the minimum wage from 20,500 rubles (roughly $5) to 54,100 rubles as of Feb. 1, imposing a huge increase in government expenditure. Most social payments in Russia, as well as the salaries of all state employees, are calculated in multiples of the minimum wage.
Government officials and some deputies protested vehemently against the move, saying it would greatly increase the budget deficit. But the bill was passed by 256 votes to 12.
The legislature also voted to raise the minimum pension from the current 34,440 rubles to 54,100 rubles.
The Duma's attack on the budget was not limited to demands for increased social spending. The budget committee also has asked the government to account for the costs of the Chechen war in the total spending figure.
The true cost of the war is not known, but estimates range as high as 15 trillion rubles. The request indicates that Duma economists are unconvinced by the official cost estimate, which states that the war would not necessitate redrawing the overall budget figures.
Yet these sums would pale in significance next to the 30 trillion rubles in increased spending that the Duma's bill on wages and pensions would represent if signed into law and executed.
Deputies also are worried about the effect the past two months' high inflation is going to have on the budget, the proclaimed goal of which is to bring monthly inflation down to 2.5 percent by the end of 1995. In December, inflation reached 16 percent.
Sergei Glazyev, head of the parliament's Economic Policy Committee, said Wednesday that the budget in its present form is unworkable and that the Duma should return to the first reading of the bill to change its basic concept.
"The actual spending will be 30 to 40 percent higher than the government predicts," Glazyev said. "The only comparable historical example was the first five-year plan in the 1930s, when all the experts said the plan was not feasible but the government went ahead and failed miserably."
The minimum wage bill exposes one of the most contentious issues in the budget debate. A conciliatory commission that amended the budget before it narrowly passed the first reading had agreed on a minimum wage of 34,440 rubles -- a sum the government felt it could absorb without increasing the budget deficit.
But Sergei Kalashnikov, head of the Labor and Social Support Committee and a member of Vladimir Zhirinovsky's ultranationalist faction, insisted that a minimum wage of 34,000 rubles would "put the entire social sphere in dire straits."
"The budget is merely a field for political games now," Kalashnikov told the Duma. "Are you ready to plunge tens of millions of people into abject poverty for the sake of this abstract budget?"
Labor Minister Gennady Melikyan argued with Kalashnikov, saying that his proposal would cost the government an extra 2.8 trillion rubles a month. Duma budget committee chairman Mikhail Zadornov backed Melikyan, saying the government could not afford to spend an additional 30 trillion rubles.
Tatyana Yarygina of the liberal Yabloko faction, who initially drafted the minimum wage bill, dropped her sponsorship of the proposal and spoke in support of the government. "I would like to establish an even higher minimum wage than 54,000 rubles," she said. "But we cannot do it now. We passed a different kind of budget in the first reading."
But Communist deputies heckled Yarygina, shouting that they had not voted for the budget. The vote on the bill showed that even if President Boris Yeltsin rejects the proposal, the argument would resume during the budget debate. Yeltsin has no ultimate power of veto over the budget.
The expense of the war in Chechnya is likely to be another stumbling block in the debate. Zadornov wrote in a letter to Prime Minister Viktor Chernomyrdin on Tuesday that only the inclusion of the war costs in the budget proposal would allow legislators to consider the budget "consciously and without distrust."
But Chernomyrdin responded Wednesday by reiterating the official stand, saying the Chechen operation would require no extra spending and no increase in the deficit: "If the expenditure turns out to be higher than envisaged by our estimates, the government considers it possible to finance it by finding additional sources in the federal budget," he wrote in his letter to the Duma.
He added that he saw no reason to revise the figures currently planned for spending (231.97 trillion rubles), and for revenues (160.32 trillion rubles) and the deficit, which is expected to reach 7.7 percent of gross domestic product.
The legislature passed the second reading of a bill raising the minimum wage from 20,500 rubles (roughly $5) to 54,100 rubles as of Feb. 1, imposing a huge increase in government expenditure. Most social payments in Russia, as well as the salaries of all state employees, are calculated in multiples of the minimum wage.
Government officials and some deputies protested vehemently against the move, saying it would greatly increase the budget deficit. But the bill was passed by 256 votes to 12.
The legislature also voted to raise the minimum pension from the current 34,440 rubles to 54,100 rubles.
The Duma's attack on the budget was not limited to demands for increased social spending. The budget committee also has asked the government to account for the costs of the Chechen war in the total spending figure.
The true cost of the war is not known, but estimates range as high as 15 trillion rubles. The request indicates that Duma economists are unconvinced by the official cost estimate, which states that the war would not necessitate redrawing the overall budget figures.
Yet these sums would pale in significance next to the 30 trillion rubles in increased spending that the Duma's bill on wages and pensions would represent if signed into law and executed.
Deputies also are worried about the effect the past two months' high inflation is going to have on the budget, the proclaimed goal of which is to bring monthly inflation down to 2.5 percent by the end of 1995. In December, inflation reached 16 percent.
Sergei Glazyev, head of the parliament's Economic Policy Committee, said Wednesday that the budget in its present form is unworkable and that the Duma should return to the first reading of the bill to change its basic concept.
"The actual spending will be 30 to 40 percent higher than the government predicts," Glazyev said. "The only comparable historical example was the first five-year plan in the 1930s, when all the experts said the plan was not feasible but the government went ahead and failed miserably."
The minimum wage bill exposes one of the most contentious issues in the budget debate. A conciliatory commission that amended the budget before it narrowly passed the first reading had agreed on a minimum wage of 34,440 rubles -- a sum the government felt it could absorb without increasing the budget deficit.
But Sergei Kalashnikov, head of the Labor and Social Support Committee and a member of Vladimir Zhirinovsky's ultranationalist faction, insisted that a minimum wage of 34,000 rubles would "put the entire social sphere in dire straits."
"The budget is merely a field for political games now," Kalashnikov told the Duma. "Are you ready to plunge tens of millions of people into abject poverty for the sake of this abstract budget?"
Labor Minister Gennady Melikyan argued with Kalashnikov, saying that his proposal would cost the government an extra 2.8 trillion rubles a month. Duma budget committee chairman Mikhail Zadornov backed Melikyan, saying the government could not afford to spend an additional 30 trillion rubles.
Tatyana Yarygina of the liberal Yabloko faction, who initially drafted the minimum wage bill, dropped her sponsorship of the proposal and spoke in support of the government. "I would like to establish an even higher minimum wage than 54,000 rubles," she said. "But we cannot do it now. We passed a different kind of budget in the first reading."
But Communist deputies heckled Yarygina, shouting that they had not voted for the budget. The vote on the bill showed that even if President Boris Yeltsin rejects the proposal, the argument would resume during the budget debate. Yeltsin has no ultimate power of veto over the budget.
The expense of the war in Chechnya is likely to be another stumbling block in the debate. Zadornov wrote in a letter to Prime Minister Viktor Chernomyrdin on Tuesday that only the inclusion of the war costs in the budget proposal would allow legislators to consider the budget "consciously and without distrust."
But Chernomyrdin responded Wednesday by reiterating the official stand, saying the Chechen operation would require no extra spending and no increase in the deficit: "If the expenditure turns out to be higher than envisaged by our estimates, the government considers it possible to finance it by finding additional sources in the federal budget," he wrote in his letter to the Duma.
He added that he saw no reason to revise the figures currently planned for spending (231.97 trillion rubles), and for revenues (160.32 trillion rubles) and the deficit, which is expected to reach 7.7 percent of gross domestic product.
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